Correlation Between Vita Coco and First Community

Can any of the company-specific risk be diversified away by investing in both Vita Coco and First Community at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vita Coco and First Community into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vita Coco and First Community Bancshares, you can compare the effects of market volatilities on Vita Coco and First Community and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vita Coco with a short position of First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vita Coco and First Community.

Diversification Opportunities for Vita Coco and First Community

0.59

Correlation Coefficient

Vita Coco  First Community

Very weak diversification

The 3 months correlation between Vita and First is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco and First Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Banc and Vita Coco is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vita Coco are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Banc has no effect on the direction of Vita Coco i.e., Vita Coco and First Community go up and down completely randomly.

Pair Corralation between Vita Coco and First Community

Given the investment horizon of 90 days Vita Coco is expected to generate 1.13 times more return on investment than First Community. However, Vita Coco is 1.13 times more volatile than First Community Bancshares. It trades about 0.08 of its potential returns per unit of risk. First Community Bancshares is currently generating about 0.04 per unit of risk. If you would invest  2,482  in Vita Coco on October 2, 2024 and sell it today you would earn a total of  1,209  from holding Vita Coco or generate 48.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Vita Coco  vs.  First Community Bancshares

Vita Coco

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

First Community Banc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Community Bancshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, First Community is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vita Coco and First Community

The main advantage of trading using opposite Vita Coco and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vita Coco position performs unexpectedly, First Community can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Community will offset losses from the drop in First Community's long position.

The idea behind Vita Coco and First Community Bancshares pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.